Early Childhood Development Has Higher Returns Than Stock Market

October 19, 2004

The Economic Policy Institute today released a report finding that investment in early childhood development can bring annual rates of return of 12 percent to the non-participating tax payers. The real rate of return that prevailed on the stock market between 1871 and 1998 was 6.3 percent. Are those eager to invest our Social Security dollars in a money-making venture paying attention?

How does investing in expensive educational, health, and nutritional programs for poor three- and four-year-olds earn the government money? According to this report, titled “Exceptional Returns” and authored by Robert G. Lynch, Chairman of the Department of Economics at Washington College, it does so by reducing public education costs (participants in early childhood development fail fewer grades and require less special education), by reducing criminal justice expenses (participants commit fewer crimes), by increasing tax revenue (participants and their parents have higher incomes), and by lowering welfare dependency.

This sounds like an ideal government program for a government run by a band of right-wing ideologues. You put in money and can confidently count on a profitable return. You could even cut some corporate taxes to make up for the gain if there were any corporate taxes left to cut.

But there’s a downside that may prove fatal to any hopes of enacting national, quality early childhood development: namely, it does people a lot of good. Positive results include the ability of children to fulfill their academic potential, a more productive economy, and the failure of numerous individuals to get robbed, raped, or murdered.

A review of the evidence will show that our current government prefers investments that provide no returns at all or even endless drains on additional resources, as long as the investments do tremendous amounts of harm to a wide range of individuals and make many people less physically safe. Examples that fit this pattern include investments in the prison industry, the war on drugs, the Pentagon’s bloated budget, and the war on Iraq.

Kicking in $19 billion to provide kids with healthy childhoods pales beside the cost of Halliburton contracts in Iraq that do not clearly provide anything at all. And while the $19 billion, according to the EPI report, would by 2050 be coming back to us in so much savings that we would see a net gain that year of $61 billion (in 2004 dollars), the war on Iraq (already costing $200 billion) will go on costing us financially and putting our lives at risk for decades to come.

How can a program that results in savings for the public treasury while transforming children’s lives for the better compete with a program that creates millions of sworn enemies while killing and maiming thousands of people who lived in the wrong country or couldn’t afford college?

Of course, I’m kidding. Our government would never fund preschool no matter how much harm it did, because preschool teachers oppose our national ethos. They’re constantly telling children to “use their words” rather than hit each other and “apologize to their friends” after they bite them. If it weren’t for cable news, these children would all be growing up maladjusted.

Still, it’s an interesting fantasy and worth paying some attention to careful studies like this one that calculate the costs and benefits of something we might be able to fight for should things someday change – things like the occupant of the White House.